PRA has published its feedback to its consultation on updating the Pillar 2 capital framework in respect of capital buffers, and updated Statements of Policy and Supervisory Statements to include the changes. The statements now confirm that:
- PRA will generally use the leverage exposure measure as the single scaling base for operational risk and interest rate risk in the banking book;
- PRA will consider certain factors in addition to a firm’s hurdle rate when setting the buffer; and
- generally, PRA will use RWAs at the start of the stress and will then consider whether adjustments are appropriate.
The changes took effect from 23 January, but the policy will need to be amended as a consequence of Brexit.